MUMBAI: The Indian rupee hovered close to its all-time low on Monday as a host of negative cues were blunted by the central bank's stern defence of the currency, while dollar-rupee forward premiums slumped after robust U.S. data dashed hopes of aggressive Federal Reserve rate cuts.
The rupee was at 83.9675 against the U.S. dollar as of 10:20 a.m. IST, nearly unchanged from its close at 83.9725 on Friday and just shy of its all-time low of 83.9850.
Outflows from local equities, higher oil prices and a stronger dollar have weighed on the rupee since last week but the currency held its ground, largely due to the Reserve Bank of India's (RBI) interventions.
The RBI has likely intervened in the non-deliverable forwards (NDF), local spot and currency futures market to help the rupee hold above the 84 handle, traders said.
The open interest on NSE dollar/rupee currency futures expiring on Oct. 29 more than doubled to US$2.4 billion over the last two trading sessions, signalling intervention by the central bank, a senior trader at a state-run bank said.
The RBI intervened in the NDF market on Friday to support the rupee before the local spot market opened, while traders have also pointed to persistent dollar sales from state-run banks, likely on behalf of the central bank, helping the rupee during local market hours.
"We expect the rupee to trade in a narrow range of 83.80 to 84.05 in the short term," Amit Pabari, managing director at FX advisory firm CR Forex, said.
Meanwhile, dollar-rupee forward premiums slumped on Monday after stronger-than-expected U.S. labour market data almost dispelled hopes of 50-basis-point (bp) Fed rate cut in November.
The one-year implied yield dropped 8 bps to 2.30 per cent. The repricing of Fed expectations also boosted the dollar. The dollar index was hovering close to its highest in nearly seven weeks on Monday, while Asian currencies were mostly lower.